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The Daily Reckoning | Saturday, May 5, 2012 A sneak peek at Addison’s new Shrinking Dollar book, Readers weigh-in on the sorry state of state education, Plus, all this week’s reckonings archived for your free edification... --------------------------------------------------------------- The Smartest Investing Expert I Know Doesn’t Work Anywhere Near Wall Street In fact, he just released a report on THREE bombshell events set to explode in 2012. He’s also ready to share his research on TWO unusual and lucrative investment opportunities. Today you can get ONE year of free access to some of the greatest investment minds around. You can’t afford to miss this shocking forecast. Click here before the first bombshell hits. Joel Bowman, checking in today from Buenos Aires... Joel Bowman “If you picked up this book, you realize the dollar isn’t worth what it used to be.” So opens Addison’s introduction to his new book, penned with Samantha Buker, The Little Book of the Shrinking Dollar. Fellow Reckoners are familiar with this theme...one we’ve addressed in these pages for years. But, according to Addison’s reckoning, the trend of devaluation is gathering pace. “The velocity of dollar-shrinkage has all the hallmarks of going into hyperdrive,” he writes, “but we won’t know for sure the hour or the time.” For anyone who has followed Addison’s work here in The Daily Reckoning, his latest contribution to this most important discussion is a worthy companion next to his previous bestsellers, Financial Reckoning Day and Empire of Debt.  As this week’s feature essay, we provide a sneak peek between the covers. Read on below... The Daily Reckoning Presents Serial Bubble Blowers By Addison Wiggin and Samantha Buker The shrinking dollar is a modern problem. The U.S. dollar has been shrinking since the inception of the Federal Reserve — the very crew assigned the task of maintaining its value. Of late, the decline is accelerating at an alarming rate. For many Americans, the suggestion that the dollar is losing value is unthinkable — even unpatriotic. The problem is not simply a lack of understanding about the nature of wealth and investment used to sustain it.  Our policy makers and economists make no distinction between wealth created through savings and investment in the real economy versus “wealth” created in the markets through asset bubbles brought about by credit policies. When I tell people this, I feel like I’m addressing a meeting of folks who want to lose weight at the local burger joint. We as individuals — and as a nation — are addicted to cheap, easy credit. What the government gives, we’ll take. We spend at a high level, and we want to accumulate wealth on the same fast track. Forget hard work, we’d rather our house go up in value like magic! Traditionally, economists recognized that it took time to build an estate. People and countries could build wealth slowly. Those days are far, far behind us. Now we are at the mercy of what I call serial bubble blowers. All the U.S. economy’s so-called improvements stem from one main reason: all economic growth during the “recovery” since 2001 can be traced to a seemingly endless array of asset and borrowing bubbles. First, we saw the stock market bubble, then the bond bubble, then the housing bubble, then the mortgage refinance bubble, then the commodities bubble. Now another bond bubble approaches. In between, we haven’t seen a single sign of stable, sustained growth. And that makes sense; consumer spending has been surging in excess of disposable income for years. That’s not real growth. Right now, Washington thinks that another round of stimulus will solve the problem. That’s like saying that overeating will eventually lead to serious dieting. Consumer spending isn’t juicing the economy. Meanwhile, since the government is broke, all the borrowing they do to fund stimulus, tax cuts, and anything else to save the economy puts us at the mercy of foreign investors. If and when they decide to slash their investments in U.S. dollars or Treasury securities, we’ll have a crash landing worse than anything we’ve seen yet. It’ll be far worse than Lehman Brothers’ collapse, far worse than 2008’s aftermath. We depend on foreign investors for everything. Be they private, institutional, or governmental, we need them. If the dollar’s fall frightens foreign owners, they will sell from this immense stock of dollar assets. But how big are these foreign holdings? You rarely hear about this on financial news channels, so you probably don’t think it’s a big deal. In fact, it’s a big fat deal. We’re sitting on $15.4 trillion in debt. How is it going to get paid? And by whom? Back before 1970, foreigners held a 5 percent slice of U.S. public debt. Today foreigners hold nearly half the pie. And the government owes a bunch of it to itself — $4.6 trillion — including what it’s borrowed from the Social Security trust fund. Is Washington at all alarmed? While the end of 2011 did culminate in near-monthly government shutdown threats, we expect the debt ceiling to go on being raised as it was under every presidency since, well, 1917, when we had a World War to finance. At last count, it’s been raised 74 times. And lest you believe the crisis came to a head in the Obama administration, we’d like to point out that he’s only raised it three times so far. Famed fiscal conservative Ronald Reagan raised it a whopping 18 times. So you see borrowing to spend is everyone’s favorite game. Darn all the consequences. Regards, Addison Wiggin and Samantha Buker,  for The Daily Reckoning Joel’s Note: The Little Book of the Shrinking Dollar is a worthy addition to Addison’s previous works, Financial Reckoning Day and Empire of Debt. Especially now! “A financial catastrophe is approaching...” writes Bill Bonner. “Addison Wiggin’s Little Book of the Shrinking Dollar helps prepare the average American for anything that can happen. Read this book and be prepared.” Today, Fellow Reckoners can do just by grabbing a copy of the book here. The One Retirement Plan Obama Can’t Touch If you’ve already retired, or want to retire soon, I urge you to watch this video presentation before we have to pull it down. This “Secret $200 Retirement Blueprint” shows you step-by-step how to grow a monster-sized nest egg with a little time and a tiny grubstake. Click here to watch this video presentation now. ALSO THIS WEEK in The Daily Reckoning... Catastrophically Successful Life Extension By Patrick Cox Marco Island, Florida  Truly historic discoveries and therapies are coming online right now that will radically decrease the threat and cost of autoimmune disorders, cancers, cardiovascular disease, Alzheimer’s, arthritis, obesity and diabetes, as well as dangerous influenzas, HIV and other virus-borne diseases. Regular readers know that I’m referring to companies in our portfolio. Clearly, this is good news both for humanity in general and investors specifically. However, these changes will be, by definition, enormously disruptive. As is always the case when big changes create new winners and dethrone the old ones. How big will these changes be? Time to Accumulate Gold and Silver By Jeff Clark Do you own enough gold and silver for what lies ahead? If 10% of your total investable assets (i.e., excluding equity in your primary residence) aren’t held in various forms of gold and silver, we at Casey Research think your portfolio is at risk. After speaking at the Cambridge House conference last month and talking with many attendees, I came away convinced that most investors fall into one of two categories: those who hold an abundance of gold and silver (which tends to be physical forms only), and those with little or none. While both groups need to diversify, I’m a little more concerned about the second group. Here’s why. What Is or Should Be the Law? By Jeffrey Tucker Auburn, Alabama It seems that the president is frustrated with Congress. What kind of legislature is this, he asks, that fails to immediately enact the will of the executive? The executive has been using a slightly different approach these days: He uses an executive order. Forget all that stuff you have read in the civics texts about checks and balances and the branches of government. The executive order bypasses them all. Credit Cards, An Endangered Species By Ray Blanco Marco Island Previously, mobile phones have helped us satisfy our need to communicate. Now, however, they are beginning to satisfy the need to engage in commerce by providing a convenient means of exchange. Smartphones are becoming a tool to accomplish what has previously required the use of cash, checks or credit cards. Bar Stool Wisdom from São Paulo By Chris Mayer Gaithersburg, Maryland “One cannot overestimate the importance of that hotel bar,” says veteran journalist Mort Rosenblum in his handbook for foreign correspondents, Little Bunch of Madmen: Elements of Global Reporting. The basic idea is that local intelligence has a remarkable tendency to collect in little pools in hotel bars where travelers and locals mix. You can learn a lot on a bar stool talking to a local or even chatting with another traveler just blowing through who you might not get otherwise. Triple the income, even in a down market? This little-known “loophole” could give you three times the income most stocks or bonds pay. And it’s got nothing to do with sinking your money into stocks or bonds. Rather, it was Ronald Reagan who made this possible — over 25 years ago — yet, it’s almost unknown to most Americans today.  Click here for the full story. The Weekly Endnote... And now, a few emails we received earlier in the week regarding an article we recently published on student loans and the growing generational wealth gap nobody wants to talk about... First up, Reckoner G.L. writes us with... Bill raises some interesting points in today’s reckoning, as usual. On some issues I agree, on others, I have a different take. On education, I fully agree. There is no payback on the societal investment. There are too many people coming out of college and university with no valuable skills to make their way in society and create their own share of wealth. I have a godchild coming out of university with an undergraduate degree in languages, French and English. She has accumulated a $53,000 debt in the process. What a waste of societal resources!!! I was fluent in French and English at age twelve with zero debts. My son was fluent in French, English and Spanish by the time he was a teenager...no debts. So when you claim the wealth of kids today is far less than it was when, the statistic is one thing, the underlying cause is another. When I graduated from university in 1969, I had $3,000 in cash; no debts. I had no car, no iPhone, no iPad, no clothes other than jeans and tee-shirts, but no debts! Conversely, my godchild has travelled the world, she has a car, an iPhone, an iPad, an Internet connection, and other recurring fixed expenses, and she would not be caught dead with anything other than designer clothes. I worked nights, weekends and all summers through college. She was too busy with her social interests to work. The $53,000 debt does not reflect the investment which her mother has made in her education at the expense of her own financial needs as she approaches retirement. Your statistics do not reflect significant changes in societal values of young people today, many of which explain the differences in wealth between my generation (I’m 65) and my niece (she’s 25)... Next up, Reckoner Mickey had this to say... There’s another angle to the brewing generational conflict that Bill Bonner has so eloquently articulated. From my perspective, the younger generations aren’t entirely the innocent victims of the boomer generation greed.  Although I am rapidly approaching the official retirement age, I will be forced to forego the many idle years of golf, fishing and travel which many retired boomers will indulge in. I will instead be forced to work until I drop dead because I can’t afford to retire. It’s not because I spent my working years living for the moment, oblivious to the inevitable future. It’s because I was robbed at gunpoint every year thus far of my working life paying property taxes to put two generations of other people’s children through school. I made a conscious decision not to have children so as to have the money to enjoy a comfortable retirement. Unfortunately our two-wolves-and-a-lamb style democracy, voting on what to eat for lunch, has allowed the majority, people with children, to vote to force the minority without children to help fund Publik Skoolz. As a result I am about $250K poorer, not counting possible investment returns. So, I’ve been mulcted twice. Once to put money into the Social Security/Medicare lockbox now containing only IOUs and a second time to fund growing ignorance perpetrated by dumb parents and greedy, unionized Publik Skool Teecherz. Despite my sympathy for young adults’ crushing college debt burdens, I have no choice but to stand behind the thieving politicians promising to claw back some of my stolen property from those who benefited from it. Such is the true, vicious nature of the “compassionate” welfare state which the world improvers have foisted upon us. Nothing in the free market can even come close to the unfairness of their dog-eat-dog socialist paradise. And finally, Reckoner “Snav” writes... Federal student loans are not a solution — they are the problem. The more money is available, the higher tuition goes. The money needs to tighten up until the schools get the message and make prices reasonable. The idea of borrowing all that money so you can be working your dream job (which rarely exists) by age 22 needs to be rethought. Graduating at age 27 to 28 with no debt and possibly even money in the bank is far and away a better choice. Lots of people do it. The choices of living at home, and going to school part time while working a full or part time job, are perfectly good options for those whose goal is education and not partying or status. Once you’re out in the workplace and doing a job, no one gives a rip what school you attended unless you’re in an extraordinary occupation. I hate where all this is going, which seems to be that we, the taxpayers, will be on the hook for a huge student loan bailout because the students chose schools they couldn’t afford and now want to blame someone else for their debts that they knowingly incurred, just like all the people who got the NINJA home loans. Enough, already. --- DR: Uh...perhaps a few students have something to contribute to the debate? As always, we welcome your thoughts. Email them to the address below and... ..enjoy your weekend. Cheers, Joel Bowman Managing Editor The Daily Reckoning ------------------------------------------------------- Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor atjoel@dailyreckoning.com